Tag: minimum wage

Minimum wage profit sharing experiment

A pizza joint shared its profits with its employees and that meant the employees made $78 an hour. I’m curious if the pizzeria used a realistic calculation for profit. If so? This makes the “I cannot afford to increase my starting pay rate to attract employees, the problem is the gov’t is making people all lazy and stuff” argument clearly disingenuous.

Profits are what you make after paying for the business’s expenses — so the ingredients, power, water, advertising, insurance, employee benefits, real estate, business loans, taxes, and such are all taken out before you call it a profit. Good accounting includes future predictable expenses as well — the facility is going to require occasional sprucing up, maintenance expenses pop up, at some point they’ll need to replace the pizza oven or refrigeration units. Just like a personal budget should include “replacement car, every 10 years, that means I need to accrue $5 a day to fund that replacement” … these expenses should be estimated out and included in the net/profit calculations. It’s possible they used a far simpler algorithm for computing profits — net proceeds minus food cost (which is something most restaurants track very well) … which would render my calculations here meaningless. But I’m going to assume “profits” actually means profits in the accounting sense.

In a lot of businesses, the owner takes a salary too — no idea if owner, well, takes a salary in the first place but if they took their salary out before calculating the daily profit. I am going to assume the owner’s salary was not already deducted. Then $78 an hour isn’t sustainable because the owner needs to eat too, but the owner could take $50 an hour per employee and still pay everyone $28 an hour.

Not that the owner gets $50 an hour for being open, but $50 a man-hour worked by any employee. Think about that for a minute — say they’ve got three people doing prep from 1P-3P and five people working when open from 3p-10p, then thee people staying on for close from 10-11P … that’s 44 man-hours worked that the owner’s keeping at $50 a man-hour. Owner keeps $2,200 each day, plus has his business has all of its expenses covered. For each of the 300 days a year they are open (since they’re open 7 days a week, this is a low estimate too), that’s $660,000.

Say I’m overestimating the owner’s share a lot — let’s cut that in half. Maybe they did the profit sharing on an unusually profitable day. Maybe they did it on a weekend day where they’re open a few more hours. Let’s say the owner can keep $1,000 a day . That means the owner pays the staff $28 an hour, pays for all of the business expenses, *and* has absolute minimum $300,000 in profit.

John Thune’s Six Bucks an Hour

It looks like he’s eliding details for effect. Per NYT:

“In Mr. Thune‚Äôs first job, as a busboy, he was paid the legal minimum of $1 an hour. Mr. Thune has said he worked at Star for seven summers, ending up as a cook earning $6 an hour. He used the money he saved to attend Biola College in California.”

He’s got a neat sounding sound bite — I made 6/hr work for me *and* paid for Uni. And, I guess, the point is that you need to move up and get pay increases so you’re making 5x or 6x minimum wage. Republicans tend to be big on the ‘your own bootstraps’ thing without considering the bigger picture.

As a kid, he quite possibly wasn’t paying for housing, electricity, food, heat, clothing, home repairs, medical bills. Maybe he was, I don’t know the guy. But, if he was living at home as a kid … with parents footing all of the ‘adult’ bills? That 6$ an hour went a LOT farther. When I worked in high school, the 60% (or whatever) of my cheque that didn’t go to taxes was for gas (to get to work, so not needed if I wasn’t working) and fun money. Seemed like a lot of money at the time.

And, great, he saved up to pay for Uni. He graduated in 1983 — average tuition, room, and board that year was 4,167. Which was a significant increase from the previous years he’d have been attending. Four years of Uni from 1980-1984, using national average tuition costs, would have been 14,634$. Maybe add in some in books/fees. What that? 20k to get his degree. I was forking over 20k a YEAR tuition, books, housing, and food. And that was only a decade later. 4500$ in 1993 dollars would have been just over 7k in 1996. Because Uni cost has seriously outpaced inflation.

When I left Uni and had to pay for adult things? I was making minimum wage — 4.75$/hr which was increased to 5.15$/hr not too long after I started. I clearly recall *not* being able to make rent on minimum wage. Eating the cheapest (and completely unhealthy) stuff from the cheapest grocery store — which had expensive health ramifications. Taking a second job because, on top of all of the just-to-survive things I needed to buy, I also needed to start repaying my student loans. Without the benefit of a degree because I couldn’t afford to finish Uni. Yeah, I had some lucky breaks that let me take jobs that paid better. I’m not conceited enough to think it was only my brilliance and fortitude that got me out barely-scraping-by jobs. I happened to have gained IT experience in Uni before *everyone* had computer experience. I happened to live in a small enough town that a lot of people in IT knew each other, and I had a friend call me up when he was leaving a job and basically offer me the position. Not to be nice — we weren’t that good of friends — but he had gotten a great job offer within the company. The internal transfer wouldn’t go through, though, unless his boss OK’d it. And his boss was going to be a LOT more willing to sign off on the xfer if there was a replacement employee right there. My phone could have been cut off for non-payment when dude tried to call me. If I didn’t have a credit card, I wouldn’t have been able to buy one nice outfit to wear to the interview. Hell, dude could have called someone else before me.